Probably as mentioned in the Y axis - in-house vs outsourced currency. So, financial operations related to currency would be part of the offer for private banks hence higher revenue (and higher pricing probably).
The management has explained the difference in pricing during the Q&A round in the detailed analyst day video link posted above by @Rishabh_Nair
PSU pricing is low as ATMās are owned by them and cash replenishment is also handled by them. They only outsource the monitoring.
This is were there is lot of scope for future outsourcing and growth as banks look at cut operating costs.
Would highly encourage everybody to watch the full video as itās full of great insights into the working of the company, the various segments they operate in and its future growth drivers and possible optionalities.
I like the rebranding effort reflecting the changing nature of the company and the simplification of the structure to 3 consolidated reporting segments.
Personally, I feel management has been very transparent and has been very conservative with their projections(given the current environment, justifiably so). They have also endured a tough ~18 months period with significant market disruption admirably well.
Q2 will likely be weak as the commentary indicates.
I find current levels attractive to increase my position but given where the markets are and the short term outlook i think there will be better opportunities to make an entry.
Disclosure: Invested at slightly higher levels about a year ago and hence my views could be biased. Please do your own due diligence
5 Likes
What I like about CMS and itās management:
Staying Away from Tenders When Pricing Is Not Supportive
- CMS management highlighted discipline in tender participation, preferring to walk away when pricing terms do not support profitable or sustainable margins.
Preference for Fixed Revenue Over Fee per Transaction
- The company has clearly shifted from transaction-linked contracts to fixed-price multi-year contracts. This pivot enhances revenue predictability, margin stability, and risk management in volatile market conditions.
Walking Away from Acquisitions with Unfavorable Valuations
- CMS has been selective with acquisitions, opting out when valuations do not align with their strategic or financial criteria. They emphasize acquiring companies with strong founding or management teams that can integrate and work collaboratively post-acquisition to realize synergies.
Focus on Returns on Capital Employed (ROCE) and Long-Term Vision
- ROCE figures have been consistently strong: around 20%, indicating high capital efficiency. Management keeps a sharp focus on sustainable, long-term value creation rather than short-term gains.ā
- Capital expenditure is cautiously managed, reflecting focus on capital discipline and long-term growth through internal investments in AI, technology, and process improvements.
The Elephant in the room currency withdrawals and the number of ATMs may reduce in the future. However, an increase in ATM outsourcing could counterbalance this decline. As the industry consolidates, better price discovery is expected to take place
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One of the major risk is money theft that cms needs to provision
Sharing link to one such incident
Iām assuming CMS Info will have insurance for these type of incidents. Anyone see such expenses in the financial reports? (premium payments)
Note: I am invested. I ought to look.
Is Hitachi CMS gaining market share?
I have seen Hitachi vans in many places, just saw one recently in my hometown (tier 3). I would suggest if anyone can try finding this out.
More than financial loss, which is small in terms of the amount of cash CMS handles (~14 lakh crores every year), the second and higher order impacts is what worries me. Likely damage to reputation, rise in cost of insurance, etc.
The incident was widely covered in most media(print and television) due to the size and daring broad daylight nature of it.
Also the police report was scathing on lack of proper controls in the safety and security practices of the company. This is likely to be shared with RBI which is worrying.
As they are now working with larger banks any loss of contracts or loss of potential clients will be damaging in the longer term.
Hopefully company addresses these issues in the next earnings call or even earlier via communications through the exchanges.
@Debojit_Kangsa_Banik during last earnings company had said they had gained market share(~53% if my memory serves me right) likely due to AGS issues and organic growth
Even in retail they have gained market share to ~35% over nearest competitor. Exact figures should be there in investor presentation but future trends need to be tracked.
@sagardubey company has maintained that on an average around 5% of revenue (~100 crore) is written off every year due to such incidents and reconciliation issues. This has been steady and will always be associated with the nature of the business. Need to see how it shapes up for the year and in the future. Also if anything needs to be provided for in this quarter.
Overall lots of headwinds. Will be interesting to see how they handle it.
3 Likes
The question that also needs to be asked is - is there any other competitor business, who can solve this issue any better than CMS?
@sbkv I followed that news item and it looks like the police was able to recover the amount. The thieves impersonated RBI personnel and fooled the field operators! (the brazenness!). They have since been apprehended.
@Chetanpinto and @Debojit_Kangsa_Banik There isnāt a competitor like CMS Info in my view. Hitachi and Radiant CMS are competitors - but on the cash management side. CMS Info managed to diversify its income streams from pure operational segment to managed services. Now they have a foothold in the retails segment with their Remote Monitoring Systems. They definitely are doing something different.
Another ValuePickr member helpfully shared a Analyst meet video in which the CEO talks about āoptionalitiesā of their business - alluding to the possibilities of unlocking new revenue streams in the future. He was unclear on what these āoptionalitiesā actually were and what is the plan for the future.
The CEO also pointed out that other companies in their space (not necessarily in India) enjoy around 33x PE while CMS Info is trading around 16 PE.
I think the management needs to think bigger - I donāt see why they canāt become a general software and technology player - getting into more sectors and businesses.
Disclaimer: I am invested.
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- Chat with Rajiv Kaul (CEO of CMS Info Systems) about how CMS managed ~25% compounding over 15 years.
- He shares what he learnt at Microsoft and Actis and how that helped him build CMS.
- Discussion on the big question: what is the future of cash when UPI and digital payments are growing so fast?
- How the internal culture at CMS acts like a moat and helps them execute better than others.
- His approach to capital allocation, how he thinks about M&A, and where to put money to work.
- How he decides what to do vs what to say no to as a leader.
1 Like
Who says the number of ATMs is decreasing? My city is a taluka-level headquarters, and many banks have opened branches here. They are opening their branches and installing ATMs. Where there was once only one SBI ATM, there are now three. What conclusion should we draw from this?
Thanks for sharing. I could see CEO has been trying to hard to convince investors about investment in CMS Info but somehow market is not in mood to listen and stock not stopping downward trend. Why is this happening? any Idea?
As per screener AI outcome, red flags are : Stock Screener India - Screener
Nice! The area where in live in there used to be 7 ATMs, now hardly 2-3 are functional. Such Apathy. Iāve seen CMS Vans come for cash replenishment.
But my area AXIS,ICICI,CANERA BANK ETC.,NEARLY ALMOST TOTAL 12 and more ATMS WITH SBI 3 ATM AND CASH DIPOSIT MACHINE and they are regular basis open and cash transfer and transaction.